On 1 and 2: Surely we are not the only profession that is a victim of India's piss poor education system? How have the others solved for this?
On 3: Yes, hence the 15 - 20% buffer and if you notice all my calculations are on the lower end. As an aside, there are also practices that work mostly on hourly mandates, why are their associates working 72 hours. Yes, practices subsidise each other, but that's equally a problem with the law firm model. For instance, a corporate partner who finds it within their realm of expertise to advise on tax or intellectual property with no prior experience makes his associates put in the work to figure that out and spend 15 hours extra, completely unaccounted for, with no repayment.
On 4: Even if they pad their time sheets, my calculation only accounts for time billed to the client. Not entered into your timesheet. Surely you don't meant to suggest that A0s are spending a whole bunch of time that they don't at all enter into their timesheets.
On 5: Lol, wasn't litigation complaining about the exact same thing? Which is true? Also, and if it is true, isn't that precisely the problem we're trying to solve for - shitty work life tradeoffs, inflated hours, and poor growth prospects push them away. Please also see 1 on this.
On 6: You're right not every A0 works 72 hours. Back when I was an A0 there have been months when I've worked 110 hour weeks. Work is cyclical sure, but it averages it self out to that hour figure over time.
Instead of resorting to the "oh these poo poo millennials are ruining my ability to exploit them like I was exploited" can we at least introspect on what we can do to make everyone's life better? Not a single T1 law firm has even attempted to solve this problem. There's a deep cultural rot in this system, and we can't look the other way. Obviously if you have people working these kinds of hours with a poor return on their life or a poor work life tradeoff you're going to have temper issues and toxic workplaces. Addressing that helps everyone. I'm fairly senior in the system myself and I understand the need to protect our revenues, but surely we can at least attempt to increase the efficiencies? Even a 20% reduction in the total number of hours spent means the poor A0 can at least work out, or spend time with a loved one, or develop an actual hobby. But oh no, we don't do that here.
Then there's the argument of oh even foreign law firms and investment banks etc are like this. Which was what was Ganit's original point, in those other places what makes it somewhat worth it is how much of that trickles down.
SAM was the only tier 1 firm who participated in the survey, but I believe the billing rates would be somewhat similar across all tier 1s, and hence the calculations here will be an extrapolation from SAM's figures. Anyway, here are some interesting figures from the survey:
The report also specifies the firm-wise split between hourly billing arrangments vs. alternative (i.e. lump sum) billing arrangements. SAM hasn't provided its data on this, but smaller firms like Spice Route, Rajani, Parinam have 60%-75% of their total revenue coming in from hourly billing arrangements. For the sake of calculation, let's make a conservative assumption that SAM's (or any other tier 1) also has 60% of its total revenue coming in from hourly billing arrangements. Also, let's assume that the revenue coming in from alternative billing arrangements would be 50% of what the firm would have otherwise earned had it followed the hourly billing arrangement.
Let's do the calculation for A0s. Let's assume a 10 hour workday for 24 days of the month. Of this, 6 hours will be spent on hourly billing work (60% of 10), and the remaining 4 hours on assignments which have alternative billing arrangements. With the above assumption that alternative billing arrangements would only yield 50% of the revenue that would have otherwise been earned had it been based on hourly basis, we'll add only 2 of these 4 hours to our calculations (Note: I do know that Associates also spend quite a bit of time on non-billable matters like knowledge management, but I've discounted for that by assuming a 10 hour workday with 6-7 days off each month, which is hardly the case at any tier 1. Thus, for the calculation, I will use an 8 hour workday.
Thus, the annual revenue generated by an A0 at a Tier 1 for her/his firm will be:
= 200 (USD) * 70 (Exchange Rate, USD to INR) * 8 (hours per day) * 24 (working days per month) * 12 (months)
= INR 3,22,56,000 (Three Crore Twenty Two Lakhs Fifty Six Thousand Rupees)
In 2019, the best A0 at any tier 1 would have at most gotten INR 16 lpa including bonus. This would be 5% of the revenue generated by the A0 for the firm during the year. Your firm takes a 95% cut of the revenue generated by you. Yes, we are underpaid. Don't let the extra 2-3 lakhs of bonus, or the free vaccines make you feel like you're firm's management is the most generous employer in the world.
In a completely different universe, Onlyfans takes a 20% cut from it's models' revenues, Youtube takes 30% from Superchats, OML takes 30% from its artists, and Stripchat takes 50%. I know this doesn't serve a relevant context at all, but I just found it interesting anyway.
P.S. This report was published in 2019, and the billing rates may have increased by 10%-15% by now.
These numbers are actually quite telling if we only but slightly reframe the question - what is the productivity of your average A0? Let us for the sake of argument assume that an A0 has to bill their client 5x of their annual retainer in order for the partner to be make a decent return on this A0, i.e. they need to bill 80L.
Assuming a fairly average practice I'm going to apportion that about 20% of this revenue comes from foreign clients (paying the most conservatively low rate of USD 180 per hour) and the remaining 80% of this coming from Indian clients (paying again, the most conservatively low rate of USD 6500 per hour). Use these figures to calculate how many hours a week said A0 needs to work in order to recover this, with the assumption that this A0's team is generous and allows them to take two weeks in the year off (i.e. they put in productive hours for 11.5 months a year).
INR ((16,00,000/(180x72))/11.5)/4 = 2.7 hours a week INR ((64,00,000/(6500))/11.5)/4 = 21.4 hours a week
This means that the average A0 needs to bill only about 24 hours a week in order for them to recover enough money to be profitable to the firm. Yet most A0s spend a multiple of at least 3x of that time in a week.
The question we really need to be asking ourselves is how do we solve for this time sink of about 45 hours a week when this time is apparently just going nowhere. The unit cost to produce one hour of A0 work is too damn high. And this figure is with some super generous assumptions. The likely required weekly billing is probably lower than that by 15-20%.
Ganit had some interesting suggestions and ya'll were just too pedantic to engage with them. Let's talk about how we can unlock value in firms. It helps everyone. Partners can keep their profits (and perhaps even grow them), and associates can retain their sanity. Leads to lesser attrition and lesser time on "training". And yet, we don't even have a conversation on how to make the model more efficient.
I am tired of hearing these wannabe partners who are justifying the pay given to associates without even acknowledging or being grateful about how much revenue an associate brings in. Plus a lot of comments posted by them are simply based on assumptions or vague claims regarding fixed/variable costs (I am surprised that they keep on forgetting that they are lawyers and hence maybe they should have put in more factual information to prove their claims). Instead they just use words like 'sweetie', 'top line revenue', 'over head costs' etc, so I thought I will post some insights based on my experience from working in a T1 firm.
In my opinion the average A0/A1/A2 is the most profitable to a law firm. The revenue they bring in will ALWAYS be at least equal to or higher than what they would cost to the firm. I mean you will have to be HIGHLY incompetent before the firm to looses money on you (i.e., you get paid more than the amount the firm charges for the work you have done). Let me show you how:
I was a newly promoted A1 when, after discounting my hours, a client was billed ~16 lakhs just for my time. The entire bill, including the bill raised for my time, was paid in full (and no please don't start making any assumptions that the partner would've reduced their hours or some other reason which would have justified my time spent on the matter). So, close to 85% of my salary for the year was recovered from just one client! The time period during which I worked on this matter was from April to May (I obviously had other matters which I worked on during these months, so you can take a guess as to how much revenue an associate can bring in two months).
At the end of the year, I easily ended up billing > 90 lakhs for the firm (SIDE NOTE: At the end of the relevant FY, there was still 10-12 lakhs that was pending to be billed and the firm WOULD bill that eventually, but these delayed billings and the revenue earned from them are fucking lost in void and are not attributed to me only because it was billed after the end of the relevant FY!). Some pretentious asshole would still comment that 90 lakhs is less, but over and above billing that much amount I also did a lot of non-billable knowledge building work (essentially unpaid work for the firm).
Anyways my point being that, at the associate level, you can easily bring in around 1 CR (1.2 CR in case you are an A2/A3) in revenue for the firm and for which you get paid a maximum of 25-26 lakhs (at least that's what I know about A3 pay scales).
Okay so I think the maximum cost, that an associate would be to a firm, would be around 30 lakhs i.e., 25L salary + 5L (being whatever "overhead costs" the wannabe partners are crying about). Okay you know what since idk much about law firms operations costs, why not make the "overhead cost" to be 10L. So the maximum that an associate would cost to a firm is 35 lakhs compared to 1 CR of revenue that they can bring in easily!
Now tell me why are the wannabe partners crying about making 65 lakhs of profit on an associate? That's an insanely high profit margin (and you know what, why not make that 70 lakhs of profit, because lets add in the 3-4 lakhs of value that you help the firm save by doing all the unbillable work, which if the firm would have outsourced, it would have easily cost them that much).
So to any other associate who reads this, you are justified in whining about being underpaid, because as you can see from the numbers, its a literal sweat shop, and the numbers don't lie!
The original post and several of the follow up replies that support the proposition, are fundamentally erroneous. Mere hours that an associate spends on a matter is not correspondent to the billing the firm receives from a client. The associate is involved in execution. That's it. The real brains and creativity and energy - this is what the client pays for btw - is of the partner. The associate is not the one who counsels the client's promoters, meets/speaks to them on Saturdays and Sundays, devises the strategy for the entire transaction keeping in mind the promoter's many other needs and issues. I can get my steno of 30 years to do the same thing that the associate does and he/she will do it far better. Any associate who truly has a brain will understand rule number 1 - never try and assume the genius and success of your senior as your own. You have merely played a role in executing a matter. That's it. This has been my guiding philosophy from the time I was a junior, which is why I have now reached where I have.
On 1 and 2: Surely we are not the only profession that is a victim of India's piss poor education system? How have the others solved for this?
On 3: Yes, hence the 15 - 20% buffer and if you notice all my calculations are on the lower end. As an aside, there are also practices that work mostly on hourly mandates, why are their associates working 72 hours. Yes, practices subsidise each other, but that's equally a problem with the law firm model. For instance, a corporate partner who finds it within their realm of expertise to advise on tax or intellectual property with no prior experience makes his associates put in the work to figure that out and spend 15 hours extra, completely unaccounted for, with no repayment.
On 4: Even if they pad their time sheets, my calculation only accounts for time billed to the client. Not entered into your timesheet. Surely you don't meant to suggest that A0s are spending a whole bunch of time that they don't at all enter into their timesheets.
On 5: Lol, wasn't litigation complaining about the exact same thing? Which is true? Also, and if it is true, isn't that precisely the problem we're trying to solve for - shitty work life tradeoffs, inflated hours, and poor growth prospects push them away. Please also see 1 on this.
On 6: You're right not every A0 works 72 hours. Back when I was an A0 there have been months when I've worked 110 hour weeks. Work is cyclical sure, but it averages it self out to that hour figure over time.
Instead of resorting to the "oh these poo poo millennials are ruining my ability to exploit them like I was exploited" can we at least introspect on what we can do to make everyone's life better? Not a single T1 law firm has even attempted to solve this problem. There's a deep cultural rot in this system, and we can't look the other way. Obviously if you have people working these kinds of hours with a poor return on their life or a poor work life tradeoff you're going to have temper issues and toxic workplaces. Addressing that helps everyone. I'm fairly senior in the system myself and I understand the need to protect our revenues, but surely we can at least attempt to increase the efficiencies? Even a 20% reduction in the total number of hours spent means the poor A0 can at least work out, or spend time with a loved one, or develop an actual hobby. But oh no, we don't do that here.
Then there's the argument of oh even foreign law firms and investment banks etc are like this. Which was what was Ganit's original point, in those other places what makes it somewhat worth it is how much of that trickles down.
SAM was the only tier 1 firm who participated in the survey, but I believe the billing rates would be somewhat similar across all tier 1s, and hence the calculations here will be an extrapolation from SAM's figures. Anyway, here are some interesting figures from the survey:
SAM's Hourly Billing Rates (in USD):
Junior Associate: 200 - 290
Senior Associate: 325- 400
Junior Partner: 425 - 450
Senior Partner: 450 - 500
Managing Partner: 550 - 750
The report also specifies the firm-wise split between hourly billing arrangments vs. alternative (i.e. lump sum) billing arrangements. SAM hasn't provided its data on this, but smaller firms like Spice Route, Rajani, Parinam have 60%-75% of their total revenue coming in from hourly billing arrangements. For the sake of calculation, let's make a conservative assumption that SAM's (or any other tier 1) also has 60% of its total revenue coming in from hourly billing arrangements. Also, let's assume that the revenue coming in from alternative billing arrangements would be 50% of what the firm would have otherwise earned had it followed the hourly billing arrangement.
Let's do the calculation for A0s. Let's assume a 10 hour workday for 24 days of the month. Of this, 6 hours will be spent on hourly billing work (60% of 10), and the remaining 4 hours on assignments which have alternative billing arrangements. With the above assumption that alternative billing arrangements would only yield 50% of the revenue that would have otherwise been earned had it been based on hourly basis, we'll add only 2 of these 4 hours to our calculations (Note: I do know that Associates also spend quite a bit of time on non-billable matters like knowledge management, but I've discounted for that by assuming a 10 hour workday with 6-7 days off each month, which is hardly the case at any tier 1. Thus, for the calculation, I will use an 8 hour workday.
Thus, the annual revenue generated by an A0 at a Tier 1 for her/his firm will be:
= 200 (USD) * 70 (Exchange Rate, USD to INR) * 8 (hours per day) * 24 (working days per month) * 12 (months)
= INR 3,22,56,000 (Three Crore Twenty Two Lakhs Fifty Six Thousand Rupees)
In 2019, the best A0 at any tier 1 would have at most gotten INR 16 lpa including bonus. This would be 5% of the revenue generated by the A0 for the firm during the year. Your firm takes a 95% cut of the revenue generated by you. Yes, we are underpaid. Don't let the extra 2-3 lakhs of bonus, or the free vaccines make you feel like you're firm's management is the most generous employer in the world.
In a completely different universe, Onlyfans takes a 20% cut from it's models' revenues, Youtube takes 30% from Superchats, OML takes 30% from its artists, and Stripchat takes 50%. I know this doesn't serve a relevant context at all, but I just found it interesting anyway.
P.S. This report was published in 2019, and the billing rates may have increased by 10%-15% by now.
Assuming a fairly average practice I'm going to apportion that about 20% of this revenue comes from foreign clients (paying the most conservatively low rate of USD 180 per hour) and the remaining 80% of this coming from Indian clients (paying again, the most conservatively low rate of USD 6500 per hour). Use these figures to calculate how many hours a week said A0 needs to work in order to recover this, with the assumption that this A0's team is generous and allows them to take two weeks in the year off (i.e. they put in productive hours for 11.5 months a year).
INR ((16,00,000/(180x72))/11.5)/4 = 2.7 hours a week
INR ((64,00,000/(6500))/11.5)/4 = 21.4 hours a week
This means that the average A0 needs to bill only about 24 hours a week in order for them to recover enough money to be profitable to the firm. Yet most A0s spend a multiple of at least 3x of that time in a week.
The question we really need to be asking ourselves is how do we solve for this time sink of about 45 hours a week when this time is apparently just going nowhere. The unit cost to produce one hour of A0 work is too damn high. And this figure is with some super generous assumptions. The likely required weekly billing is probably lower than that by 15-20%.
Ganit had some interesting suggestions and ya'll were just too pedantic to engage with them. Let's talk about how we can unlock value in firms. It helps everyone. Partners can keep their profits (and perhaps even grow them), and associates can retain their sanity. Leads to lesser attrition and lesser time on "training". And yet, we don't even have a conversation on how to make the model more efficient.
In my opinion the average A0/A1/A2 is the most profitable to a law firm. The revenue they bring in will ALWAYS be at least equal to or higher than what they would cost to the firm. I mean you will have to be HIGHLY incompetent before the firm to looses money on you (i.e., you get paid more than the amount the firm charges for the work you have done). Let me show you how:
I was a newly promoted A1 when, after discounting my hours, a client was billed ~16 lakhs just for my time. The entire bill, including the bill raised for my time, was paid in full (and no please don't start making any assumptions that the partner would've reduced their hours or some other reason which would have justified my time spent on the matter). So, close to 85% of my salary for the year was recovered from just one client! The time period during which I worked on this matter was from April to May (I obviously had other matters which I worked on during these months, so you can take a guess as to how much revenue an associate can bring in two months).
At the end of the year, I easily ended up billing > 90 lakhs for the firm (SIDE NOTE: At the end of the relevant FY, there was still 10-12 lakhs that was pending to be billed and the firm WOULD bill that eventually, but these delayed billings and the revenue earned from them are fucking lost in void and are not attributed to me only because it was billed after the end of the relevant FY!). Some pretentious asshole would still comment that 90 lakhs is less, but over and above billing that much amount I also did a lot of non-billable knowledge building work (essentially unpaid work for the firm).
Anyways my point being that, at the associate level, you can easily bring in around 1 CR (1.2 CR in case you are an A2/A3) in revenue for the firm and for which you get paid a maximum of 25-26 lakhs (at least that's what I know about A3 pay scales).
Okay so I think the maximum cost, that an associate would be to a firm, would be around 30 lakhs i.e., 25L salary + 5L (being whatever "overhead costs" the wannabe partners are crying about). Okay you know what since idk much about law firms operations costs, why not make the "overhead cost" to be 10L. So the maximum that an associate would cost to a firm is 35 lakhs compared to 1 CR of revenue that they can bring in easily!
Now tell me why are the wannabe partners crying about making 65 lakhs of profit on an associate? That's an insanely high profit margin (and you know what, why not make that 70 lakhs of profit, because lets add in the 3-4 lakhs of value that you help the firm save by doing all the unbillable work, which if the firm would have outsourced, it would have easily cost them that much).
So to any other associate who reads this, you are justified in whining about being underpaid, because as you can see from the numbers, its a literal sweat shop, and the numbers don't lie!
ok thx!